Healing Ways

Harvard Pilgrim Health Care improved its cash position by using software to empower customers. First in a series of articles on the order-to-cash c...
Marie LeoneMay 11, 2004

Harvard Pilgrim Health Care Inc. is a survivor. In 1999, the Wellesley, Massachusetts-based nonprofit — which operates managed health-care plans and Medicaid/Medicare programs — found itself in state receivership after spending the previous 11 of its 30 years on an acquisition spree.

A Massachusetts insurance task force cited information technology — in a sense, too much information technology — as a main contributor to the company’s fall from grace. Indeed, all those acquisitions had saddled the insurer with 55 disparate IT systems that utterly hamstrung HPHC’s ability to process claims and resulted in more than $60 million dollars in unexpected losses.

As part of its turnaround strategy, by 2001 HPHC outsourced the company’s IT operation and maintenance to Plano, Texas-based Perot Systems Corp. After paring down the number of claims systems and integrating those that remained, HPHC turned its attention to the order-to-cash cycle, to bolster its cash position by improving accounts receivable.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

To be sure, however, “the problems with cash collection had nothing to do with the accounts receivable department,” according to Dave Segal, HPHC’s senior vice president of customer service and operations. Segal blamed low customer satisfaction — and the slow accounts receivable process that followed it — on an enrollment system that was plagued by “too much human intervention.”

Most HPHC customers — which include corporate benefits administrators, third-party administrators, and insurance brokers — were making changes to HPHC’s 800,000-member roster by phone, by fax, by e-mail, and even by snail mail. Some clients provided roster updates electronically, which was “better than paper,” notes Segal, but many of the electronic files didn’t mesh with HPHC’s system, “so it was still tough to reconcile,” he laments.

The manual hand-off of data for HPHC’s roster of members meant big customer-service headaches. Some members were incorrectly dropped from the roster; others were never added. Some were assigned to the wrong plan program; others were linked to incorrect data. Members and administrators alike were frustrated by the inefficiencies, and their complaints soon made themselves felt in uncollected receivables.

HPHC realized, says Segal, that the key was to give customers and their employees more control over the roster, provided that certain quality constraints were in place to ensure customer privacy and data consistency.

Segal embarked on a yearlong project with Perot Systems consultants to develop a homegrown enrollment solution. HPHC Connect, which debuted about two years ago, enables the insurer’s corporate customers and their employees to log on to a secure Website and update the member roster themselves. HPHC also integrated an online billing component from edocs Inc. into the existing managed-care IT system, which included a financial module from Oracle and accounts receivable software from Amisys.

Today, nearly 85 percent of HPHC’s customers use Connect for enrollment, says chief financial officer Joe Capezza, who arrived about two-and-a-half years ago from the same position at New York-based Group Health Inc. And Capezza says that over the two years that HPHC Connect has been up and running, Pilgrim has reported an increase from 47 days to 80 days of cash on hand — the metric typically used by the health-care industry to measure a company’s current financial condition.

In addition, says Capezza, investment income continues to grow despite the decline in interest rates, and 90 percent of HPHC customers pay within the month they are billed. The improvements, he maintains, are a direct result of using information technology to give corporate customers and their employees control of the enrollment process.

On the other hand, only 20 percent of HPHC’s customers now use online billing; many of the others, believes Capezza, haven’t yet made the cultural shift to a paperless system. While HPHC executives may find it tempting to insist that their corporate customers make electronic payments in exchange for the convenience of electronic invoicing, Segal believes that being flexible about the payment formats is a better route to take right now.

Like many companies, HPHC also found that clients tend to use online tools during the initial sign-up phase — but soon afterward, unless those clients recognize tangible benefits, they revert to paper.

Highlighting those benefits takes time and on-the-ground client education. For example, the HPHC Connect system — launched a year earlier than the edocs online billing component — received an extra 12 months of aggressive marketing support from the field sales staff. In fact, says Capezza, the sales department uses the self-service Connect tool as part of their arsenal to win over new clients. Meanwhile, marketing support for the billing system is only now getting into gear.

The concept of online billing also suffers from user misconceptions, says HPHC controller Marie Montgomery. For instance, many customers think that signing up requires them to make immediate payments. Quite the contrary, says Montgomery: Payments are still due on the same schedule the customer agreed to originally. Even the act of paying online is encouraged but not mandated. Segal reckons that as the sales staff meets with more clients over the next year, online billing usage will climb.

That will only improve HPHC’s order-to-cash process, asserts Capezza. After all, online service is right in line with the company’s motto: “Making health care a little easier.”